Correlation Between Yatsen Holding and Colgate Palmolive

Can any of the company-specific risk be diversified away by investing in both Yatsen Holding and Colgate Palmolive at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Yatsen Holding and Colgate Palmolive into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yatsen Holding and Colgate Palmolive, you can compare the effects of market volatilities on Yatsen Holding and Colgate Palmolive and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Yatsen Holding with a short position of Colgate Palmolive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yatsen Holding and Colgate Palmolive.

Diversification Opportunities for Yatsen Holding and Colgate Palmolive

-0.33

Correlation Coefficient

Yatsen Holding  Colgate Palmolive

Very good diversification

The 3 months correlation between Yatsen and Colgate is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Yatsen Holding and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive and Yatsen Holding is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Yatsen Holding are associated (or correlated) with Colgate Palmolive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colgate Palmolive has no effect on the direction of Yatsen Holding i.e., Yatsen Holding and Colgate Palmolive go up and down completely randomly.

Pair Corralation between Yatsen Holding and Colgate Palmolive

Considering the 90-day investment horizon Yatsen Holding is expected to generate 1.31 times less return on investment than Colgate Palmolive. In addition to that, Yatsen Holding is 4.91 times more volatile than Colgate Palmolive. It trades about 0.01 of its total potential returns per unit of risk. Colgate Palmolive is currently generating about 0.08 per unit of volatility. If you would invest  7,051  in Colgate Palmolive on January 28, 2024 and sell it today you would earn a total of  2,050  from holding Colgate Palmolive or generate 29.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Yatsen Holding  vs.  Colgate Palmolive

Yatsen Holding

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yatsen Holding are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Yatsen Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Colgate Palmolive

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Colgate Palmolive are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Colgate Palmolive may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Yatsen Holding and Colgate Palmolive

The main advantage of trading using opposite Yatsen Holding and Colgate Palmolive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yatsen Holding position performs unexpectedly, Colgate Palmolive can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Colgate Palmolive will offset losses from the drop in Colgate Palmolive's long position.

The idea behind Yatsen Holding and Colgate Palmolive pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.